MBO Proposal - SP+ Corp - Pres18052018 - 0740
MBO Proposal - SP+ Corp - Pres18052018 - 0740
MBO Proposal - SP+ Corp - Pres18052018 - 0740
04 | LBO Parameters
05 | Revenue Drivers
12 | Investor Returns
13 | Risks
14 | Conclusions & Recommendations
15 | Appendix
Executive Summary
SP+ Corporation is a market leader providing diverse solutions for professional parking, ground
transportation, facility maintenance, security, and event logistics services to real estate owners and managers
in a wide array of markets. Operating in the US, Canada & Puerto Rico.
We are proposing a bid price of: USD1.2Bn based on a 30% premium on share price.
We recommend: value creation through a variety of value creating primary and secondary levers
Cost of Debt 4%
SP Plus 834.7 947.35 1197.78 11.7 x
WACC 15%
DCF Valuation inline with the premium offered
Total Discounted Cash Flows $167.62
2018 2019 2020 2021 2022 $913.39
Terminal Value
FCF $35.30 $47.39 $53.22 $59.46 $65.96 Total Market Cap $1,081.01
DCF $30.65 $35.74 $34.85 $33.81 $32.57 Total Net Debt $ 112.40
COGS (2017)
GROSS MARGINS
Expense & Cash Flow Assumptions
Comments
Discipline in driving down SG&A costs – economies of scale in back office, information systems, marketing and
staffing expenses.
Need to ensure SP+ can continue competing effectively
CAPEX as a % of Revenue in the marketplace.
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Comments
Maintain CAPEX as a % of Revenue to (1) continue investing in enhanced technologies needed to continue to
drive down costs and (2) fund small bolt-on acquisitions given highly fragmented nature of market.
A strong management team ready to tackle the challenge. The package will align the incentives
and ensure that our team and that of the target company work in the same direction.
0.18%
0.19%
0.20%
0.21%
0.23%
0.24%
0.25%
0.26%
0.28%
0.29%
0.30%
0.32%
0.33%
0.34%
0.35%
0.36%
0.37%
0.38%
0.39%
0.40%
0.41%
0.42%
0.43%
0.44%
+1% when IRR +1% when IRR
Ratchet exceeds 25%, by 5% exceeds 25%, by 5% regular cash ratchet cash Management Returns
tranches tranches
Value creation through Operational Levers
Accelerated growth of revenue drivers and control of cost drivers though
variety of operational levers – expansion to cross-selling and agency effect
NET INCOME $ 20.20 $ 25.50 $ 43.80 $ 52.32 $ 58.12 $ 64.17 $ 70.64 $ 77.37
Investing Activities:
Capital Expenditures: $ (9.60) $ (13.00) $ (6.80) $ (23.80) $ (24.29) $ (24.79) $ (25.30) $ (25.82)
One-Time and Other Items: $ (2.20) $ (0.80) $ 9.10 $ - $ - $ - $ - $ -
Cash Flow from Investing: $ (11.80) $ (13.80) $ 2.30 $ (23.80) $ (24.29) $ (24.79) $ (25.30) $ (25.82)
Free Cash Flow: $ 31.70 $ 45.40 $ 46.80 $ 35.30 $ 47.39 $ 53.22 $ 59.46 $ 65.96
Cash Available for New Debt Repayment: $ 13.03 $ 28.43 $ 49.66 $ 77.13 $ 111.10
Cash Used for New Debt Repayment: $ (31.99) $ (31.99) $ (31.99) $ (31.99) $ (31.99)
Pros Cons
Scope of further consolidation of the Difficulty in finding suitable fund that can mentor the
fragmented market management
Secondary LBO Strong cash flows of the company makes it an A lot of possible operational improvements already
attractive target for PE funds done in 1st MBO, making it difficult for next LBO
Fair value at 11.7X EBITDA multiple also Need to keep management stake rolling over
makes the company attractive for next LBO
Pros Cons
Possibility of higher exit valuation, compared Lock in of part equity; only partial exit possible
IPO to secondary LBO immediately
Subject to regulations and market conditions
Investor Returns
Money multiplied projected to be 3.1X over 5 years at an IRR of 25.02%,
highly driven by margin effect and leverage effect
30.00%
Historical Projected
20.00% Investor Returns:
FY17 FY22
EBITDA: $M $ 102.40 $ 168.91
EBITDA Multiple: x 11.7 x 11.7 x
15.00% Enterprise Value: $M $ 1,197.78 $ 1,976.21
0% Equity Value: $M $ 1,085.18 $ 1,524.43
11.21%
Investor Equity: $M $ (473.89) $ 1,448.21
10.00%
Money-on-Money (MoM) Multiple:3.1 X
Internal Rate of Return (IRR): 25.02%
5.00%
2.80%
0.00%
Revenue Effect Margin Effect Multiple Effect Leverage Projected Deal
Effect IRR
Risks
Key risk of SP+ LBO is decrease in current contract retention rate.
Rising insurance premiums Need for liability insurance to cover automobiles and personal property within parking
lots causes high levels of insurance costs. Rising premiums in the industry and regulations to include previously uncovered
risks. Could be offset by SP+ size and buying power in addition to increased security services.
CEO CFO Sales Director
We recommend doing the deal and acquiring SP Plus for $48.23 per share
(EV/EBITDA of 11.7x) in a leveraged buyout transaction.
The valuation is very reasonable; projected IRR is 25%, while it is ~20% in the
base case scenario, and even under more pessimistic cases it only falls to ~15%
The fast-growing and highly fragmented market supports the deal, as do the
opportunity in improving margins in the leased part of the business model.
Appendix
I. Sensitivity Tables
Appendix I-A: Sensitivity Tables
EBITDA Exit Multiple:
24.7% 9.5 x 10.0 x 10.5 x 11.0 x 11.5 x 11.7 x 12.2 x 12.7 x 13.2 x
$ 40.81 10.0% 19.59% 21.30% 22.92% 24.45% 25.92% 26.49% 27.86% 29.18% 30.45%
Purchase $ 42.67 15.00% 17.99% 19.73% 21.37% 22.92% 24.41% 24.98% 26.37% 27.70% 28.97%
Premium $ 44.52 20.00% 16.43% 18.19% 19.86% 21.43% 22.93% 23.51% 24.91% 26.26% 27.54%
and Per $ 46.38 25.00% 14.89% 16.69% 18.38% 19.98% 21.49% 22.08% 23.50% 24.85% 26.15%
Share Offer $ 48.23 30.00% 13.38% 15.21% 16.93% 18.55% 20.09% 20.68% 22.11% 23.48% 24.80%
Price in USD: $ 50.09 35.00% 11.90% 13.76% 15.50% 17.15% 18.71% 19.31% 20.76% 22.15% 23.47%
$ 51.94 40.00% 10.42% 12.32% 14.10% 15.77% 17.36% 17.97% 19.44% 20.84% 22.18%
%age Debt
24.7% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 65.0% 70.0% 75.0%
$ 40.81 10.0% 19.61% 20.62% 21.77% 23.10% 24.65% 26.49% 28.70% 31.43% 34.91%
Purchase $ 42.67 15.00% 18.45% 19.41% 20.50% 21.76% 23.23% 24.98% 27.09% 29.70% 33.04%
Premium $ 44.52 20.00% 17.34% 18.24% 19.27% 20.46% 21.85% 23.51% 25.52% 28.01% 31.20%
and Per $ 46.38 25.00% 16.26% 17.11% 18.08% 19.20% 20.51% 22.08% 23.98% 26.35% 29.40%
Share Offer $ 48.23 30.00% 15.22% 16.01% 16.92% 17.97% 19.20% 20.68% 22.48% 24.72% 27.61%
Price in USD: $ 50.09 35.00% 14.21% 14.95% 15.79% 16.77% 17.93% 19.31% 21.00% 23.11% 25.85%
$ 51.94 40.00% 13.23% 13.91% 14.69% 15.60% 16.68% 17.97% 19.54% 21.53% 24.11%
Leased R1
%age increase # of parking spaces
24.7% (75.0%) (60.0%) (45.0%) (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0%
$ 40.81 10.0% 26.4856% 26.4858% 26.4860% 26.4862% 26.4864% 26.4866% 26.4868% 26.4869% 26.4871%
Purchase $ 42.67 15.00% 24.9778% 24.9780% 24.9782% 24.9784% 24.9786% 24.9788% 24.9790% 24.9792% 24.9794%
Premium $ 44.52 20.00% 23.5100% 23.5102% 23.5104% 23.5106% 23.5108% 23.5110% 23.5112% 23.5114% 23.5116%
and Per $ 46.38 25.00% 22.0781% 22.0783% 22.0785% 22.0787% 22.0789% 22.0791% 22.0793% 22.0795% 22.0797%
Share Offer $ 48.23 30.00% 20.6787% 20.6789% 20.6791% 20.6793% 20.6795% 20.6797% 20.6799% 20.6801% 20.6803%
Price in USD: $ 50.09 35.00% 19.3084% 19.3086% 19.3088% 19.3090% 19.3092% 19.3094% 19.3096% 19.3098% 19.3100%
$ 51.94 40.00% 17.9642% 17.9645% 17.9647% 17.9649% 17.9651% 17.9653% 17.9655% 17.9657% 17.9659%
Appendix I-B: Sensitivity Tables
Leased R1
%age increase in revenue per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 25.0% 40.0%
$ 40.81 10.0% 20.34% 21.67% 22.95% 24.17% 25.35% 26.49% 27.58% 29.16% 30.66%
Purchase $ 42.67 15.00% 18.76% 20.11% 21.40% 22.64% 23.83% 24.98% 26.09% 27.68% 29.19%
Premium $ 44.52 20.00% 17.21% 18.58% 19.89% 21.14% 22.35% 23.51% 24.63% 26.23% 27.76%
and Per $ 46.38 25.00% 15.68% 17.08% 18.41% 19.68% 20.90% 22.08% 23.21% 24.83% 26.37%
Share Offer $ 48.23 30.00% 14.19% 15.61% 16.96% 18.25% 19.49% 20.68% 21.82% 23.46% 25.02%
Price in USD: $ 50.09 35.00% 12.72% 14.16% 15.54% 16.85% 18.10% 19.31% 20.47% 22.13% 23.70%
$ 51.94 40.00% 11.26% 12.73% 14.13% 15.47% 16.74% 17.97% 19.14% 20.82% 22.41%
Leased R1
%age decrease in cost per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0%
$ 40.81 10.0% 20.19% 21.56% 22.86% 24.12% 25.33% 26.49% 27.61% 28.69% 29.74%
Purchase $ 42.67 15.00% 18.60% 19.99% 21.32% 22.59% 23.81% 24.98% 26.11% 27.20% 28.26%
Premium $ 44.52 20.00% 17.05% 18.46% 19.80% 21.09% 22.32% 23.51% 24.65% 25.76% 26.82%
and Per $ 46.38 25.00% 15.53% 16.96% 18.32% 19.63% 20.88% 22.08% 23.23% 24.35% 25.42%
Share Offer $ 48.23 30.00% 14.03% 15.48% 16.87% 18.20% 19.46% 20.68% 21.85% 22.97% 24.06%
Price in USD: $ 50.09 35.00% 12.55% 14.04% 15.45% 16.79% 18.08% 19.31% 20.49% 21.63% 22.73%
$ 51.94 40.00% 11.09% 12.61% 14.04% 15.41% 16.72% 17.97% 19.16% 20.32% 21.43%
Leased - R2
%age increase # of parking spaces
24.7% (75.0%) (60.0%) (45.0%) (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0%
$ 40.81 10.0% 26.4870% 26.4869% 26.4868% 26.4867% 26.4866% 26.4866% 26.4865% 26.4864% 26.4863%
Purchase $ 42.67 15.00% 24.9792% 24.9792% 24.9791% 24.9790% 24.9789% 24.9788% 24.9787% 24.9786% 24.9786%
Premium $ 44.52 20.00% 23.5114% 23.5113% 23.5112% 23.5111% 23.5111% 23.5110% 23.5109% 23.5108% 23.5107%
and Per $ 46.38 25.00% 22.0795% 22.0795% 22.0794% 22.0793% 22.0792% 22.0791% 22.0790% 22.0789% 22.0789%
Share Offer $ 48.23 30.00% 20.6801% 20.6800% 20.6799% 20.6798% 20.6798% 20.6797% 20.6796% 20.6795% 20.6794%
Price in USD: $ 50.09 35.00% 19.3098% 19.3097% 19.3097% 19.3096% 19.3095% 19.3094% 19.3093% 19.3092% 19.3091%
$ 51.94 40.00% 17.9657% 17.9656% 17.9656% 17.9655% 17.9654% 17.9653% 17.9652% 17.9651% 17.9650%
Appendix I-C: Sensitivity Tables
Leased - R2
%age increase in revenue per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 25.0% 40.0%
$ 40.81 10.0% 26.06% 26.15% 26.23% 26.32% 26.40% 26.49% 26.57% 26.70% 26.82%
Purchase $ 42.67 15.00% 24.55% 24.64% 24.72% 24.81% 24.89% 24.98% 25.06% 25.19% 25.32%
Premium $ 44.52 20.00% 23.08% 23.17% 23.25% 23.34% 23.43% 23.51% 23.60% 23.72% 23.85%
and Per $ 46.38 25.00% 21.64% 21.73% 21.82% 21.90% 21.99% 22.08% 22.17% 22.30% 22.42%
Share Offer $ 48.23 30.00% 20.24% 20.33% 20.41% 20.50% 20.59% 20.68% 20.77% 20.90% 21.03%
Price in USD: $ 50.09 35.00% 18.86% 18.95% 19.04% 19.13% 19.22% 19.31% 19.40% 19.53% 19.66%
$ 51.94 40.00% 17.51% 17.60% 17.69% 17.78% 17.87% 17.97% 18.06% 18.19% 18.32%
Leased - R2
%age decrease in cost per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0%
$ 40.81 10.0% 26.08% 26.16% 26.24% 26.32% 26.41% 26.49% 26.57% 26.65% 26.73%
Purchase $ 42.67 15.00% 24.57% 24.65% 24.73% 24.82% 24.90% 24.98% 25.06% 25.14% 25.22%
Premium $ 44.52 20.00% 23.10% 23.18% 23.26% 23.35% 23.43% 23.51% 23.59% 23.68% 23.76%
and Per $ 46.38 25.00% 21.66% 21.74% 21.83% 21.91% 22.00% 22.08% 22.16% 22.25% 22.33%
Share Offer $ 48.23 30.00% 20.25% 20.34% 20.43% 20.51% 20.60% 20.68% 20.76% 20.85% 20.93%
Price in USD: $ 50.09 35.00% 18.88% 18.97% 19.05% 19.14% 19.22% 19.31% 19.39% 19.48% 19.56%
$ 51.94 40.00% 17.53% 17.62% 17.70% 17.79% 17.88% 17.97% 18.05% 18.14% 18.22%
Managed - R1
%age increase # of parking spaces
24.7% (75.0%) (60.0%) (45.0%) (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0%
$ 40.81 10.0% 26.4208% 26.4340% 26.4471% 26.4603% 26.4734% 26.4866% 26.4997% 26.5128% 26.5259%
Purchase $ 42.67 15.00% 24.9124% 24.9257% 24.9390% 24.9523% 24.9655% 24.9788% 24.9921% 25.0053% 25.0186%
Premium $ 44.52 20.00% 23.4439% 23.4573% 23.4707% 23.4841% 23.4976% 23.5110% 23.5244% 23.5378% 23.5512%
and Per $ 46.38 25.00% 22.0112% 22.0248% 22.0384% 22.0520% 22.0655% 22.0791% 22.0927% 22.1062% 22.1198%
Share Offer $ 48.23 30.00% 20.6109% 20.6247% 20.6385% 20.6522% 20.6659% 20.6797% 20.6934% 20.7071% 20.7208%
Price in USD: $ 50.09 35.00% 19.2398% 19.2537% 19.2676% 19.2816% 19.2955% 19.3094% 19.3233% 19.3372% 19.3511%
$ 51.94 40.00% 17.8947% 17.9089% 17.9230% 17.9371% 17.9512% 17.9653% 17.9794% 17.9935% 18.0075%
Appendix I-D: Sensitivity Tables
Managed - R1
%age increase in revenue per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 25.0% 40.0%
$ 40.81 10.0% 20.36% 21.69% 22.96% 24.18% 25.35% 26.49% 27.58% 29.15% 30.65%
Purchase $ 42.67 15.00% 18.77% 20.12% 21.41% 22.65% 23.83% 24.98% 26.08% 27.67% 29.18%
Premium $ 44.52 20.00% 17.22% 18.59% 19.90% 21.15% 22.35% 23.51% 24.63% 26.23% 27.75%
and Per $ 46.38 25.00% 15.70% 17.09% 18.42% 19.69% 20.91% 22.08% 23.21% 24.82% 26.36%
Share Offer $ 48.23 30.00% 14.21% 15.62% 16.97% 18.26% 19.49% 20.68% 21.82% 23.46% 25.01%
Price in USD: $ 50.09 35.00% 12.73% 14.18% 15.55% 16.85% 18.11% 19.31% 20.46% 22.12% 23.69%
$ 51.94 40.00% 11.28% 12.75% 14.14% 15.47% 16.75% 17.97% 19.14% 20.81% 22.39%
Managed - R1
%age decrease in cost per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0%
$ 40.81 10.0% 22.81% 23.58% 24.33% 25.07% 25.78% 26.49% 27.17% 27.85% 28.50%
Purchase $ 42.67 15.00% 21.26% 22.04% 22.80% 23.54% 24.27% 24.98% 25.67% 26.35% 27.02%
Premium $ 44.52 20.00% 19.74% 20.54% 21.31% 22.06% 22.79% 23.51% 24.21% 24.90% 25.57%
and Per $ 46.38 25.00% 18.26% 19.07% 19.85% 20.61% 21.35% 22.08% 22.79% 23.48% 24.16%
Share Offer $ 48.23 30.00% 16.81% 17.63% 18.42% 19.19% 19.95% 20.68% 21.40% 22.10% 22.78%
Price in USD: $ 50.09 35.00% 15.38% 16.21% 17.02% 17.80% 18.57% 19.31% 20.04% 20.74% 21.44%
$ 51.94 40.00% 13.98% 14.82% 15.64% 16.44% 17.21% 17.97% 18.70% 19.42% 20.12%
Managed - R2
%age increase # of parking spaces
24.7% (75.0%) (60.0%) (45.0%) (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0%
$ 40.81 10.0% 26.4725% 26.4753% 26.4781% 26.4809% 26.4837% 26.4866% 26.4894% 26.4922% 26.4950%
Purchase $ 42.67 15.00% 24.9646% 24.9674% 24.9703% 24.9731% 24.9760% 24.9788% 24.9817% 24.9845% 24.9873%
Premium $ 44.52 20.00% 23.4966% 23.4995% 23.5023% 23.5052% 23.5081% 23.5110% 23.5138% 23.5167% 23.5196%
and Per $ 46.38 25.00% 22.0646% 22.0675% 22.0704% 22.0733% 22.0762% 22.0791% 22.0820% 22.0849% 22.0878%
Share Offer $ 48.23 30.00% 20.6649% 20.6679% 20.6708% 20.6738% 20.6767% 20.6797% 20.6826% 20.6856% 20.6885%
Price in USD: $ 50.09 35.00% 19.2945% 19.2975% 19.3004% 19.3034% 19.3064% 19.3094% 19.3124% 19.3153% 19.3183%
$ 51.94 40.00% 17.9502% 17.9532% 17.9562% 17.9592% 17.9623% 17.9653% 17.9683% 17.9713% 17.9743%
Appendix I-E: Sensitivity Tables
Managed - R2
%age increase in revenue per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 25.0% 40.0%
$ 40.81 10.0% 24.27% 24.72% 25.17% 25.62% 26.05% 26.49% 26.91% 27.54% 28.16%
Purchase $ 42.67 15.00% 22.73% 23.20% 23.65% 24.10% 24.54% 24.98% 25.41% 26.04% 26.66%
Premium $ 44.52 20.00% 21.24% 21.71% 22.17% 22.62% 23.07% 23.51% 23.95% 24.59% 25.21%
and Per $ 46.38 25.00% 19.78% 20.25% 20.72% 21.18% 21.63% 22.08% 22.52% 23.17% 23.80%
Share Offer $ 48.23 30.00% 18.35% 18.83% 19.30% 19.77% 20.23% 20.68% 21.12% 21.78% 22.42%
Price in USD: $ 50.09 35.00% 16.95% 17.44% 17.92% 18.39% 18.85% 19.31% 19.76% 20.42% 21.07%
$ 51.94 40.00% 15.57% 16.06% 16.55% 17.03% 17.50% 17.97% 18.42% 19.09% 19.75%
Managed - R2
%age decrease in cost per parking space
24.7% (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0%
$ 40.81 10.0% 24.21% 24.68% 25.14% 25.59% 26.04% 26.49% 26.92% 27.35% 27.78%
Purchase $ 42.67 15.00% 22.67% 23.15% 23.62% 24.08% 24.53% 24.98% 25.42% 25.86% 26.28%
Premium $ 44.52 20.00% 21.18% 21.66% 22.13% 22.60% 23.06% 23.51% 23.96% 24.40% 24.83%
and Per $ 46.38 25.00% 19.72% 20.21% 20.68% 21.16% 21.62% 22.08% 22.53% 22.97% 23.41%
Share Offer $ 48.23 30.00% 18.29% 18.78% 19.27% 19.75% 20.22% 20.68% 21.14% 21.59% 22.03%
Price in USD: $ 50.09 35.00% 16.88% 17.39% 17.88% 18.36% 18.84% 19.31% 19.77% 20.23% 20.67%
$ 51.94 40.00% 15.50% 16.01% 16.51% 17.01% 17.49% 17.97% 18.43% 18.89% 19.35%